Canada: Tax Assistance

OVERVIEW OF THE CANADA RECOVERY HIRING PROGRAM (CRHP)

With public health measures and local economies gradually reopening, on June 2, 2021, the federal government announced the introduction of a new program—the Canada Recovery Hiring Program (CRHP)—to help businesses adversely affected by the COVID-19 pandemic hire new workers or offset the payroll costs of increased wages or hours. To date, the CRHP is the second pandemic-related wage subsidy program introduced by the federal government. The first was the Canada Emergency Wage Subsidy (CEWS) program introduced in March 2020, which was designed to mitigate against job losses and incentivize employers to rehire workers previously laid off due to the COVID-19 pandemic. The two programs interact such that as CEWS support declines, eligible employers can still receive some support through CRHP as they reopen. CRHP runs from June 6, 2021, to November 20, 2021.

ELIGIBILITY CRITERIA FOR THE CRHP

Who can apply for CRHP?

Eligible employers include:

• Those who meet the eligibility criteria for the Canada Emergency Wage Subsidy (CEWS) program except for certain corporations and partnerships
• Individuals
• Registered charities
• Non-profit organizations

Eligible for-profit corporations and partnerships are restricted to:

• Canadian-controlled private corporations (CCPCs)
• Co-operative corporations eligible for the small business deduction
• Partnerships where at least 50% of the partnership's interests are held, either directly or indirectly, by employers eligible for the CRHP

How much decline in revenue is required to be eligible for CRHP?

Eligible employers must also experience a decline in revenue, calculated in the same manner as the CEWS program. In particular, the decline in revenue must be greater than 0% for the first claim period (i.e. Period 17). For the following periods (Period 18 to Period 22), however, the decrease in revenue must be more than 10%.

HOW MUCH SUBSIDY DO ELIGIBLE EMPLOYERS RECEIVE UNDER THE CRHP?

Since the CRHP complements the already-established CEWS program (link to article on CEWS), the claim periods for CRHP matches CEWS for ease of reference. Accordingly, the first claim period for CRHP is Period 17. Because the subsidy rates gradually decline, CRHP thereby incentivizes businesses to hire new workers in the earlier claim periods. The subsidy rate for each claim period is outlined in the table below.

To determine the amount of subsidy that eligible employers receive, the incremental remuneration is multiplied by the specified subsidy rate for that claim period. To clarify, the incremental remuneration refers to the increase in total eligible employee pay between two time periods: the claim period and the baseline period (March 14 to April 10, 2021). The formula below illustrates this calculation.

Amount of subsidy = subsidy rate x incremental remuneration

Amount of subsidy = subsidy rate x (total remuneration paid to all eligible employees for the claim period – total remuneration paid to all eligible employees for baseline period)

For example, Subsidy Eligible Corp., an eligible employer, experienced a revenue decline of 5% in Period 17. It anticipates that business activity will ramp up and decides to hire two more employees. Between the baseline period from March 14 to April 10, 2021, the Corporation paid a total of $12,000 to its three employees (let us assume that each employee received $4,000 during this period). In Period 17 (June 6 to July 3, 2021), Subsidy Eligible Corp. hires two more employees, resulting in an overall payroll of $20,000. Given that Period 17's subsidy rate is 50%, the amount of subsidy that Subsidy Eligible Corp. would receive for this claim period would be $4,000. For more details on this computation, please see below.

Amount of subsidy = subsidy rate x incremental remuneration

Amount of subsidy = subsidy rate for claim period 17 x (total remuneration paid to all eligible employees for claim period 17 – total remuneration paid to all eligible employees for baseline period)

Amount of subsidy calculation = 50% x ($20,000 – $12,000) =$8,000

Amount of subsidy = 0.5 x ($8,000) =$4,000

Therefore, amount of subsidy = $4,000

Bear in mind, under the CRHP, the maximum remuneration that each eligible employee can receive is capped at $1,129 per week.

WHICH WAGE SUBSIDY PROGRAM SHOULD ELIGIBLE EMPLOYERS APPLY FOR: CEWS OR CRHP?

As mentioned previously, CRHP complements CEWS. The rationale is that as the CEWS subsidy rates gradually decline, eligible employers can still receive support through CRHP during the summer and hire new employees to meet their needs.

Because CEWS has been extended from June 2021 to September 25, 2021, one thing to note is that two programs' claim periods overlap between Period 17 and 20. Evidently, this leads to the question of which program to apply for. For these periods, the Canada Revenue Agency (CRA) allows eligible employers to apply for either program, but not both. Moreover, the CRA permits eligible employers to apply for the program that provides them with the greater subsidy. Therefore, for claim periods 17 to 20, eligible employers should compare how much support they will receive under each program to determine which will be more beneficial to them given their circumstances.

EXTENSION OF OTHER BUSINESS SUPPORT PROGRAMS

Along with the federal government's announcement of the new Canada Recovery Hiring Program, it also announced an extension to the Business Availability Program and Highly Affected Sectors Credit Availability Program from June 30, 2021, to December 31, 2021.

PRO TAX TIPS

Eligible employers who receive CRHP will need to include the subsidy in the employer's income, which will be taxed in the year it was received. Our experienced Canadian tax lawyers can help you determine whether your business structure qualifies for the program and provide guidance on how to optimize your benefit from CRHP or CEWS. If you have questions concerning the CRHP, CEWS or other COVID-related support programs, please contact our tax law office to speak with one of our experienced Canadian tax lawyers.